The Impact of Immigration on North Carolina’s Workforce

Much like the rest of the nation, North Carolina is undergoing a significant demographic transition as declining birth rates and population aging are expected to persist over the coming decades. This confluence of demographic factors produces headwinds for the state’s workforce at a time when labor markets remain historically tight. Against this backdrop, immigration[1] will serve an increasingly critical role in supporting the labor force and bolstering North Carolina’s economic trajectory.

In this article, we examine immigration-related demographic changes over time and explore their workforce implications for North Carolina. Based on Current Population Survey (CPS) data, we find that, due to pandemic-related disruptions, there was a 124,000 shortfall in the state’s working-age immigrant population by the end of 2022. Addressing this shortfall would provide labor force benefits, since foreign-born individuals have higher labor force participation rates than those native-born—primarily due to differences in age composition—and comprise a nontrivial share of employment in several industries.

North Carolina is home to a diverse community of immigrants which witnessed notable growth in past decades. As of 2020, the state’s foreign-born population was around 832,600 individuals, comprising 8.0% of the state’s overall population (see Figure 1). Most of North Carolina’s rapid immigration growth occurred in the 1990s when the foreign-born population grew from 115,000 to 430,000 over the decade. Since then, the growth rate has slowed, mirroring trends seen across the U.S.

Figure 1

In the decade leading up to the COVID-19 pandemic, North Carolina’s net international migration rate trended downward, paralleling an even sharper decline in the state’s natural change rate (births and deaths).[2] Between 2012 and 2020, the net international migration rate fell from 2.3 to 0.9 per 1,000 individuals (see Figure 2). Pandemic-related barriers, including travel restrictions and a slowdown in visa processing, severely impeded immigration in 2020 and 2021. However, by 2022, net international migration rebounded quickly, perhaps due to visa processing returning to pre-pandemic levels.

Figure 2

The dramatic slowdown in immigration during the early years of the COVID-19 pandemic has had direct consequences for North Carolina’s workforce. Due to pandemic disruptions, North Carolina had 124,000 fewer working-age immigrants by the end of 2022 than would have been expected given the 2007-2019 growth trend (see Figure 3). Our analysis suggests this gap persists and even widens when only considering immigration among prime working-age individuals (ages 25-54).[3]

The rapid rebound in international migration in 2022 is a promising development; however, compared with past decades, the 2022 immigration increase is still low by historical standards, and a one-year rise does not guarantee continued growth. Caveats aside, the uptick does signify a potential economic bright spot in the years to come if net international migration remains elevated above the levels seen in the years leading up to, and throughout, the COVID-19 pandemic.

Figure 3

Across the United States, immigrants tend to have higher rates of labor force participation than native-born individuals. In North Carolina, the labor force participation rate of foreign-born individuals averaged 68.6% in 2022 compared to 59.8% for those native-born (see Figure 4). Since 2007, the foreign-born population has had participation rates that are, on average, 10 percentage points above those born in the United States.

Figure 4

What explains the higher labor force participation rates among foreign-born individuals compared to the native-born population? One important factor to consider is the age composition of immigrants: those who emigrate to the United States are more likely than the native-born to be in their prime working years.

Our analysis shows that in 2022, nearly four-fifths of the 7.7 percentage point gap between foreign-born and overall labor force participation rates in North Carolina is due to the age structure of immigrants (see Figure 5).[4] As a counterfactual illustration: if the age composition of the immigrant population matched the overall statewide age composition in 2022, the group’s labor force participation rate would have been 62.4%, indicating a smaller gap of around 1.6 percentage points.

The remaining gap in labor force participation may be attributable to various other reasons, such as sociocultural differences, economic factors in the originating country, and other difficult-to-quantify factors.

The fact that age composition explains most of the higher labor force participation rates among immigrants is important for North Carolina’s workforce. Due to an aging population, the state will experience slower growth in its working-age population over the coming decades. However, because immigrants tend to be in their prime working years, they directly increase the size of the workforce and partially offset the working-age population slowdown.

Figure 5

In addition to participating in the labor force at higher rates, immigrants also contribute materially to certain industries in North Carolina. Around 29% of all construction workers are foreign-born, and nearly one-in-four workers in the agriculture industry are immigrants (see Figure 6). Additional industries employing foreign-born workers include administrative support and waste management (20.1%), accommodation and food services (18.3%), and manufacturing (17.2%).

As the state continues to wrestle with tight labor market conditions across various industries, immigrants will serve a vital role in meeting increased employer demand for labor. There were more than 372,000 job openings across North Carolina in December 2022. As discussed previously, the shortfall in working-age immigrants since 2020 may contribute to hiring difficulties, and addressing this shortfall will likely yield the benefit of increased labor supply.

Figure 6

Immigration will continue to be linked to labor market conditions in North Carolina. In the years and decades to come, demographic forces will continue to shape the state’s economy—chief among them, an aging population. Although immigration cannot entirely counteract the state’s workforce challenges, international immigration may serve to alleviate some of the demographic headwinds and support the state’s economic future.